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Friday, March 29, 2019
Akina: OHA spending rate unsustainable
By Keli'i Akina PhD @ 9:41 PM :: 3233 Views :: OHA

What OHA trustees should be doing

by Keli’i Akina, PhD, OHA Trustee At-Large, Ka Wai Ola, April, 2019 

While OHA trustees play many roles in the Hawaiian community and across the state, there is one function deserving of their full attention: oversight of land assets and the Native Hawaiian Trust Fund (NHTF). This requires understanding that OHA is essentially an administrator, tasked with managing trust assets (comprised of land assets and financial assets, i.e., the NHTF portfolio) for the betterment of the conditions of native Hawaiians.

As I have stated in previous columns, Trustees need to commit to: (1) protecting the trust, (2) growing the trust, and (3) using the trust to serve beneficiaries. As Trustees now create our next strategic plan, here are some issues I strongly believe we must address.

1. PROTECT THE TRUST

In 2016, I produced a report entitled, "Crucial Recommendations for Achieving Fiscal Sustainability." In "Crucial Recommendations' I shared that OHA's spending rate was unsustainable, and placed the intergenerational equity of the Native Hawaiian Trust Fund (NHTF) in jeopardy. Trustees now have an opportunity to address the Spending Policy, and other financial policies that are under review.

OHA's current Spending Policy allows for annual withdrawals of 5% from the NHTF, and makes available an additional $3 million from OHA's Fiscal Reserve (an account made up of carryover funds from a previous budget cycle). Consultants retained by OHA warned that at this rate, the $350 million value of the NHTF is projected to decline to $300 million in twenty years.  Two recommendations were made:  maintain the Spending Policy and eliminate Fiscal Reserve withdrawals, or reduce the Spending Policy to 4.5% and eliminate Fiscal Reserve withdrawals.

I definitely recommend that we reduce the Spending Policy to 4.5% and eliminate Fiscal Reserve withdrawals completely.  With discipline to protect the trust, OHA can focus on growing the trust.

2. GROW THE TRUST

As I stated in "Crucial Recommendations," reining-in excess spending is necessary to preserve the intergenerational equity of the NHTF, and would also grow the current NHTF value of $350 million to $795 million in 20 years.

For this reason, I am committed to keeping OHA focused on a capital growth model, and for that, OHA must generate revenue from its land assets by finding ways to properly develop OHA's goldmine properties in Kaka'ako Makai. OHA received 30 acres of land in Kaka'ako Makai in 2012, and the lack of progress in development of the parcels costs OHA significant money, when we factor in the lost income potential and the time-value of money.

As a result, OHA's real estate portfolio currently only yields 2-3% annually. Compare that with Kamehameha Schools, whose land assets yield an annual return of 11%.  There is much potential for growth which we must stop missing out on.

3. USE THE TRUST

OHA commissioned a scientific survey in 2015, and among those surveyed, the sentiment was that OHA should spend its resources on bread and butter issues such as housing, jobs, education and health care.

Growing the trust can allow OHA to better use the trust for these stated objectives. With disciplined spending and a commitment to growth of its assets, OHA can deploy greater resources into the Hawaiian community, allowing for even more meaningful impact to OHA's mission to better the conditions of native Hawaiians.

CONCLUSION

The strategic planning process is an opportunity for Trustees to steer OHA into the future, therefore, hearing from our beneficiaries is particularly important now. Get in touch with your Trustees, and share your mana'o on how OHA can best protect the trust, grow the trust and use the trust for the real needs of the Hawaiian community.

---30---

2015: PKF Report: "OHA Will Run Out of Funds"

2016: Akina OHA: “Crucial Recommendations for Achieving Fiscal Sustainability”

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